November 2018

Medicare 101: Answers to Your Most Urgent Questions

If you’re planning for retirement or approaching retirement age, health care costs are an important consideration. Medicare, a federal health insurance program administered by the Centers for Medicare & Medicaid Services (CMS), is likely to play an important role in managing those costs. But the program can be complicated, and there are several aspects that are not well understood. Here are answers to some common questions about Medicare to help you plan appropriately for health care expenses in retirement.

Who is eligible for Medicare?

Typically, U.S. citizens are eligible for Medicare beginning at age 65¹. However, younger people with disabilities and older people with end-stage kidney failure requiring dialysis or transplant may also be eligible.

How does Medicare work?

To understand Medicare is to understand its parts. Medicare Part A is hospital insurance, while Medicare Part B is medical insurance. Part A covers inpatient hospital, skilled nursing facility and some home health care services. The coverage is free if you or your spouse have paid Medicare taxes for at least 10 years². Medicare Part B covers physician services, outpatient hospital services, certain home health services, durable medical equipment and other items. Parts A and B—also known as Original Medicare—do not cover vision, hearing or dental care³.

What are Medicare Parts C and D?

Medicare Part C—also called Medicare Supplement Insurance or Medigap policies—are private insurance policies that cover the costs that Medicare Parts A or B do not. Medicare Advantage Plans, a term you may know from advertisements, are a specific type of Medicare Supplement Insurance. The plans include health maintenance organizations (HMOs), preferred provider organizations (PPOs), fee for services (FFS) plans and others. Different plans have different coverage specifications and thresholds.

Medicare Part D is a prescription drug plan, and like Part C, it is also a private insurance policy. You can purchase Part D as a separate plan or access Part D coverage through your Part C provider or other private insurer.

Some Part C Medicare Advantage Plans offer prescription drug coverage and/or vision and dental insurance, and even wellness programs⁴.

What does Medicare cost?

Those who meet the 10-year work criteria typically don’t pay anything for Medicare Part A. If you don’t meet the work requirements, you may pay a tiered premium. However, Part A does have an annual deductible and co-insurance requirements, as well as limits on inpatient and skilled nursing care.

The standard Part B premium for 2019 is $135.50, but if you exceed certain income limits, it may be higher. If you receive Social Security benefits, you may pay less than the standard premium. The 2019 Part B deductible will be $185. After that, you may be responsible for up to 20 percent of the Medicare-approved amount for covered services⁵.

Can I keep my doctor if I’m on Medicare?

As long as your doctor accepts Medicare as a form of payment, you may continue going to the same doctor.

How and when do I sign up for Medicare?

Contact the Social Security Administration to sign up for Medicare. If you are not receiving Social Security payments, apply at least four months ahead of your 65th birthday to begin receiving Part A and Part B on the first day of the month you turn 65⁶.

You may choose your Parts C and D when you are newly eligible for Medicare. Making changes to your plans in subsequent years needs to be done during the annual designated open enrollment periods, typically October 15 through December 15.

What is the penalty for late sign-up?

In most cases, if you don’t sign up for Part B when you’re initially eligible, you’ll have to pay a late payment penalty for as long as you have Part B coverage. For example, your Part B monthly premium could go up 10% for each 12-month period in which you were eligible but didn’t enroll.

If, for any 63-day period after your initial enrollment period is over, you do not have 1) a Medicare prescription drug plan; or 2) other drug coverage; or 3) a Medicare supplemental insurance policy, a late penalty may be added to your Part D premium. The amount depends on how long you went without coverage and remains in effect for as long as you have Part D coverage⁷.

The devil is in the details

Medicare is a complicated program characterized by a myriad of details. And while its rules and features may make you want to put your head in the sand, don’t. Take the time now to understand how the program works and enroll as soon as you’re eligible. You can find out more on Medicare.gov or by contacting an elder care attorney or retirement planning specialist for assistance.

Sources

¹ https://medicare.com/administration/how-do-i-qualify-for-medicare/
² https://medicare.com/administration/how-do-i-qualify-for-medicare/
³ “2018 Medicare Parts A & B Premiums and Deductibles,” Centers for Medicare and Medicaid Services, November 17, 2017. https://www.cms.gov/newsroom/fact-sheets/2018-medicare-parts-b-premiums-and-deductibles
⁴ “What’s a Medicare Advantage Plan?” Medicare.gov, 2015. https://www.medicare.gov/sites/default/files/2018-07/11474.pdf
⁵ “Medicare Costs at a Glance,” Medicare.gov. 2017. https://www.medicare.gov/your-medicare-costs/medicare-costs-at-a-glance
⁶ “How Do I Get Parts A & B?” Medicare.gov. 2017 https://www.medicare.gov/sign-up-change-plans/how-do-i-get-parts-a-b
⁷ “Part D late enrollment penalty,” Medicare.gov. 2017. https://www.medicare.gov/drug-coverage-part-d/costs-for-medicare-drug-coverage/part-d-late-enrollment-penalty